RBI ups cap for priority sector lending

MUMBAI: Banks can now lend more funds to the housing sector with the Reserve Bank of India on Monday increasing the cap for home loans under priority sector to Rs 20 lakh from 15 lakh earlier.

"Loans up to Rs 20 lakh to individuals for purchase or construction of dwelling unit per family, (excluding loans granted to by banks to their own employees)," would come under categories of priority sector, said the new RBI guidelines.

Besides, loans given for repairs to damaged houses of families up to Rs one lakh in rural and semi-urban areas and up to Rs two lakh in urban and metropolitan areas would also be included as priority sector advances, it said.

Earlier the RBI, in its credit policy on April 24, had taken a compassionate view on housing loans and relaxed the provisioning norms for housing sector loans up to Rs 20 lakh.

The central bank, while maintaining the overall priority sector lending limit to 40 per cent, has also increased the lending cap for educational loans to Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad. Earlier, the limits were Rs 7.5 lakh and Rs 15 lakh respectively.

The revised guidelines issued today come into immediate effect, RBI said. The revised RBI guidelines excluded loans to software industry from priority sector lending. It also did not include loans to small road and water transport operations.

Revising the eligibility criteria for priority lending, RBI said, "Only those sectors which are employment-intensive such as agriculture, and tiny and small enterprises should be eligible for inclusion under the priority sector."

The guidelines specified that NRI deposits such as FCNR (B) and NRNR deposits balances will no longer be deducted for computation of Adjusted Net Bank Credit (ANBC) for priority sector lending purpose.

Investments made by banks in recapitalisation bonds floated by the government will not qualify as priority sector lending, the guidelines said. It further said fresh bank deposits with NABARD or SIDBI on account of non-achievement of priority sector targets will not be treated as priority sector advances.

0Comments

Are you a Business Owner? Get Your Free Business Listing on Economic Times.